But as Burnham prepares for power, the Chancellor has acknowledged the pressure to go further. This week, she told the British Chambers of Commerce’s conference she had “unfinished business is on fiscal devolution”.
“That’s one area where I certainly want to make further progress, and I know that’s an area that Andy wants to,” she said.
It raises the prospect of the Treasury losing some control of key taxes, allowing local politicians more of a say.
“Business rates devolution is a very strong probability,” O’Neill said in his radio interview. “I think exploring [devolving] aspects of income tax is possible.”
That sounds a lot like mayors could gain the power to raise rates locally. Potentially this could lead to the end of income tax as the national levy, breaking the charge up into a patchwork of varying rates depending on location.
Burnham has long championed devolution and has signalled that more is on the way if he moves into Downing Street.
Just last month he demanded “a serious transfer of power and resources right across the North of England”, though his team is coy about the precise details of what this might mean for tax policy.
Some will see this as an expensive postcode lottery in which residents, tied to one place by family, employment and the exorbitant costs of moving, are almost randomly allocated a tax rate which differs from those in other local authorities.
Others may view it as an important experiment in local democracy, economic policy and voters’ choices.
Anthony Breach, at the Centre for Cities, a think tank, notes that allowing local authorities to keep more of the revenue generated locally should encourage pro-growth policies.
Stronger growth incentives
“You would have stronger growth incentives at the mayoral level to grow the tax base and to create more jobs, get people into work, increase wages, and use proceeds to fund more local investment or perhaps to cut the council tax precept,” he says.
But others fear the strategy will simply lead to higher taxes. After all, the average local authority increased council tax by 4.9pc this year, just shy of the 5pc maximum allowed without gaining special permission.
Sir Mel Stride, the shadow chancellor, warns that it means higher taxes are on the way.
“Devolving income tax rates to the regions risks opening the door to tax rises on working people,” he says.
“Rachel Reeves has already brought in a holiday tax under the guise of fiscal devolution. If Andy Burnham now wants to look at income tax as well, working families across the country should brace themselves for yet more taxes.”
Income tax bills are already rising sharply via the stealth tax of frozen thresholds. The Government raked in just under £200bn in income tax in 2019-20, the year before Covid. It is set to take almost £360bn this year, rising to £430bn in 2030-31.
